This year, we anticipate that there will be no shortage of tech developments in the financial services industry (FSI). In fact, 2018 is on track to be a truly transformative year, as banks continue to modernize operations, adopt more agile and open technologies and hone their strategies. This will not come without challenges, including: the complexities of the regulatory landscape, a more demanding customer, and increased competition, just to name a few.

To transform while overcoming these challenges, expect financial services firms to continue investing in artificial intelligence (AI) and machine learning. AI can be used to detect fraud while it is happening, and through machine learning, understand and identify patterns of suspicious behavior. Similarly, both technologies can be used to ensure regulatory requirements are met on a real-time basis. These technologies continue to evolve, making them smarter and even more automated – and less reliant on being trained by or managed by humans. According to PwC, AI companies received more funding in 2017 than ever before, and for good reason. In a study the firm did in 2017, about half (52%) of survey respondents in the financial services industry said they’re currently making “substantial investments” in AI, and 66% said they expect to be making substantial investments in three years. Almost three out of four (72%) business decision makers believe that AI will be the business advantage of the future.

One of the intriguing services that’s gaining traction in FSI is that of the robo-advisor, a software-based bot that uses algorithms to automatically allocate, manage and optimize assets and provide digital advice. Sure, robo-advisors aren’t new. One of the first dates back to 2008. But their popularity is growing, and according to the U.S. News & World Report, robo-advisors had $224 billion in assets under management in 2017. Robo-advisors are evolving too; expect to see them get smarter and rely on more and more on machine learning and automated intelligence, especially as both of those technologies advance in their own right.

Robo-advisors not only fit well with the financial service industry’s increased focus on AI, machine learning and advanced automation tools, they also align with the industry’s ongoing strategic focus to deliver services that put customers first. In the same vein as robo-advisors, we at Red Hat will be watching to see how financial services firms advance their use of smart home assistants like Amazon’s Echo and Google’s Home – both of which are booming in sales and becoming a daily part of more and more customers lives.

Another hot topic in 2018 will be, of course, blockchain. As we wrote on this blog site back in March 2017, blockchain applications have the potential to change how financial institutions manage their data, applications, transactions, and business processes. A blockchain is a distributed, decentralized transaction ledger saved by each node in the network. It is a peer-to-peer system with no central authority or database managing the transaction flow. Early pilots in trade finance and clearing/settlements have demonstrated real efficiencies when employing this technology. It makes sense, then, that blockchain will be a major focus this year and beyond. We expect to see a focus on know your customer (KYC) and digital identity with continued investment in distributed ledger technologies throughout 2018. We’ll continue to cover it on this blog, so stay tuned (and check out a few other posts, like The future of blockchain — how can financial institutions embrace it and win? and The future of blockchain — leveraging the possibilities of Blockchain-as-a Service).

Some other trends we’ll be tracking in the financial services sector include Open Banking and PSD2. Open Banking facilitates data sharing and pushes banks to use standard and secure data formats so it can be more easily shared between authorized organizations online. Open Banking is also part of a major piece of European legislation known as the second Payment Services Directive, or PSD2, which requires banks to open up their data to third parties.

We will also keep our eyes on the use of high-performance computing (HPC) containers. The financial services industry moved quickly on HPC several years ago to support advanced risk management analytics and to prepare for the digital economy (and something another Red Hat blog covered in this post). MiFID II, the European Union’s second Markets in Financial Instruments Directive that attempts to force more transparency on how and when assets are traded, is on our radar, and as always, so is security.

Stay tuned this year as we follow the trends and developments in the financial services industry. Let us know what you’d like to read about, and let us know what you’ll be watching for in 2018, in the comments section below.